The cost of buying a typical home in Manteca, Turlock, Ripon, Modesto and elsewhere has gone up 10.6 percent during the past month.

The cost jump has nothing to do with the price of the home. It has everything to do with the cost of money.

Most of us tend to focus on the actual median housing price as the key sign of the economic vitality of housing. That isn’t the entire picture unless you happen to be paying cash.

Given that in excess of 80 percent of the loans made in the 209 region to buyers that are purchasing homes to live in them are FHA secured, mortgage rates and the parameters imposed by that loan guarantee program are critical to determining housing  affordability and therefore economic vitality.

Rates on 30-year loans that represent the bulk of all mortgages reached 4.46 percent last week. That is a full one percent higher than a month prior.

During the same time frame the median closed escrow price of an existing Manteca resale home was $258,360. Assuming a borrower makes the minimum required 3.5 percent down payment, the monthly cost of a FHA loan for a $258,360 house jumped $148.50 in the past month going from $1,394.69 to $1,543.19. That’s a 10.6 percent jump in monthly housing costs with home prices moving a cent.

It effectively raised the household income needed to qualify for a FHA mortgage on a typical median-priced Manteca resale home from $53,078 a year to $58,768.

It has effectively taken a big bite out of housing affordability. It also means the window has closed to some in the Manteca market who — thanks to rising home price as well —  may not even be able to afford even the lowest priced homes available. For everyone else still with big enough income to be home hunting and who need a mortgage, the rate increase has effectively reduced the amount of home they can qualify to purchase.

The rate movement coupled with a rise in prices also underscores another harsh fact. Less people are going to be able to buy homes close to their work.

Those employed in the Bay Area who are now renting there are more likely to head east over the Altamont Pass looking for housing.

That will further accelerate home prices in the Northern San Joaquin Valley forcing many who work in impacted communities to look for homes in other communities if they want to buy.

The golden days of housing affordability are fading.



To contact Dennis Wyatt, e-mail dwyatt@mantecabulletin.com